Investors Flock to Ultrashort Bond and Gold ETFs Amid Market Uncertainty

February Key Takeaways

• The Morningstar Global 60/40 Index eked out a 0.1% gain in February 2025, as bonds and foreign stocks offset losses in the US stock market.
• US exchange-traded funds raked in $108 billion in February.
• Taxable-bond ETFs collected $38 billion, led by ultrashort bonds’ second blowout month in a row.
• Bitcoin-linked ETFs endured their first month of outflows since April 2023 as most cryptocurrencies plummeted in February.
• Gold ETFs led the focused commodities Morningstar Category to $4.7 billion of inflows, their best month in nearly three years.
• Vanguard again paced all ETF providers in flows, continuing its knack for fast starts to the year.

The table below shows February returns for a sample of Morningstar-analyst-rated ETFs that represent major sections of the stock and bond markets. The global blended portfolio scratched out a 0.4% gain in a testament to the power of diversification. Bond components Vanguard Total Bond Market ETF BND and Vanguard Total International Bond BNDX returned 2.2% and 0.9%, respectively, shoring up shaky returns from global stocks. Vanguard Total World Stock VT, responsible for most of the blended portfolio’s recent growth, slid 0.4% as US stocks hit the skids.

Bond ETF Performance: Long-Term Bond Funds Fare Best

February marked US bonds’ best monthly returns since July 2024. It was not smooth sailing, though. Inflation data released in mid-February came in higher than expected, slowing down the timeline for potential interest-rate cuts and denting most bond indexes. They rallied back after dwindling consumer confidence and economic uncertainty bolstered demand for the safety that bonds offer. Vanguard Total Bond Market ETF posted gains in 10 of the February’s final 12 trading days, helping it dig out of its hole and finish the month significantly higher than where it started.

ETFs stocked with longer-dated bonds fared the best. IShares 20+ Year Treasury Bond ETF TLT soared 5.7% in February, its best month since December 2023. The economy powered the fund, whose long-term holdings would benefit more than most from an interest-rate cut. The more-conservative iShares Short Treasury Bond ETF SHV scratched out a modest 0.3% return.

Most ETFs that prioritize credit to interest-rate risk finished higher in February as well. IShares Broad USD Investment Grade Corporate Bond ETF USIG climbed 2.1%. Its best month since July 2024 came despite widening credit spreads, which normally sting corporate-bond portfolios. Demand for these investments seemed to stem from the safety of bonds—not optimism over the firms that issued them. SPDR Bloomberg High Yield Bond ETF JNK, which is more sensitive to the credit backdrop, gained a milder 0.9%. Corporate-bond performance tends to land somewhere between Treasuries and stocks. It was closer to the former in February.

Foreign bonds finished last month in the black as well. Roughly 63% of Vanguard Total International Bond comprises European bonds, many of which benefited from the global flight to safety like their US peers. Emerging markets constitute just 7% of the portfolio but kicked in solid returns for the second consecutive month as well.

Bond ETF Flows: Ultrashort Bond Funds Are Popular Amid Market Uncertainty

Investors poured $38 billion into taxable-bond ETFs in February. Their organic growth rate swelled to 4.6% for the young year, second only to the much smaller nontraditional-equity group. Twenty-two of 23 taxable-bond categories scored inflows through two months of 2025.

Ultrashort bond funds caught fire in January and continued to blaze in February. The category raked in $14 billion in their best month since October 2023. In a month where uncertainty clouded markets, it makes sense that investors flocked to these uber-safe offerings. Cash substitutes like iShares 0-3 Month Treasury Bond ETF SGOV and SPDR Bloomberg 1-3 Month T-Bill ETF BIL gathered $3.5 billion and $1.4 billion, respectively. Actively managed funds that aim for higher yields enjoyed inflows, too. JPMorgan Ultra-Short Income ETF JPST, the third-largest active ETF available, took in a fresh $1.9 billion. And collateralized loan obligation ETFs stayed hot in February. Those products absorbed about $3 billion last month, led by Janus Henderson AAA CLO ETF JAAA and its $2 billion haul.

Investors also gravitated toward bond ETFs built around credit in February. High-yield bond ETFs pulled in $2.3 billion; intermediate core-plus and multisector bond funds weren’t far behind. On the other hand, the short-, intermediate-, long-term government bond ETFs collectively absorbed just $2.3 billion, a fairly mild sum for the $365-billion group. Nearly $3 billion of outflows from iShares 20+ Year Treasury Bond ETF put a lid on the government-bond group. BlackRock reduced that ETF’s weight in a widely followed model portfolio in February, sparking outflows that may prove to be a one-off occurrence.

Out With the New, in With the Old: Bitcoin ETFs Lose, While Gold ETFs Gain

Bitcoin slid 17.4% in February. Investors took note and yanked $1.9 billion from the digital-assets category, which marked its first outflows since April 2023. Fidelity Wise Origin Bitcoin FBTC bore the brunt of the pain with $1.2 billion of outflows. IShares Bitcoin Trust ETF IBIT, the largest in the category, stayed nearly flat. BlackRock announced on Feb. 28 that iShares Bitcoin Trust ETF would join select model portfolios. That news could hotwire that fund’s momentum, but a return to high-flying inflows will hinge on whether bitcoin can rebound. February showed that, for now, flows into crypto ETFs are only as good as their recent performance.

“Digital gold” fell out of favor in February, but real gold did not. The focused commodities category, which houses precious-metals ETFs, raked in $4.7 billion last month. That was its most lucrative month since March 2022, another period defined by waning investor confidence. SPDR Gold Shares GLD hauled in $3.4 billion in February to lead the charge. Investors were slow to reward gold for its recent returns: SPDR Gold Shares climbed 36.4% over the 12 months entering February, a stretch in which its category collected just $3 billion. It seems that investors needed turbulent stock markets for gold to reach their radar.

The Top ETF Providers: Vanguard Inflows Dominate in February

Vanguard paced all ETF providers with $26 billion of inflows in February. That helped the second-largest provider hop out to first place in the 2025 ETF flows race, tallying more than double the inflows of its next-closest competitor.

Vanguard has historically started faster than its chief rivals. While iShares and State Street normally see their weakest inflows in the first quarter and their strongest in the last, Vanguard’s ETF lineup generates equal demand throughout the year. The exhibit below shows that, on average, the first quarter has actually been Vanguard’s best over the past 15 years.

Vanguard could very well retain its lead throughout the year—it has in each of the last five, after all—but its rivals’ tendency to charge late could make the race interesting.